Tough sell for grape growers

Unable to sell 25 tons of premium chardonnay grapes, Russian River grapegrower Tim Meinken has partnered with a Monterey County winery to turn the grapes into wine he'll try to sell next year on the bulk market.

October 6, 2009, 10:32PM

10/06/2009

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Tim Meinken has sold every grape he?s ever grown on his Russian River vineyard for the past 20 years.

It didn?t matter if it was chardonnay, pinot noir or syrah, all the grapes he and his wife, Anne Giere, have grown on their 32 acres of rolling hills west of Windsor have enjoyed high demand.

Until this year.

Slammed by the recession and credit crunch, North Coast wineries aren?t buying any more grapes than they absolutely need this year, putting the squeeze on Meinken and fellow high-end grape growers large and small.

?I?ve been trying to sell these grapes for months,? Meinken said, overlooking his vineyard where 25 tons of golden chardonnay still hangs unsold.

With harvest in full swing and his grapes ripening fast, Meinken this week faced a crucial decision ? sell his grapes for a fraction of last year?s value, leave them to rot on the vine, or make them into wine.

His decision is one confronting more and more growers as the harvest continues to barrel forward toward its furious conclusion.

In Sonoma County, a little more than half the estimated 200,000-ton crop has been picked, with only about three weeks left before the rest rolls in, said Nick Frey, president of the Sonoma County Winegrape Commission.

Most of those grapes, perhaps 80 percent, have been pre-sold under contracts to wineries. The remaining 20 percent of the crop typically sells on the open market in the months before harvest.

Those growers who?ve been hoping big wineries would swoop in and buy up the extra grapes have been left waiting at the altar. Either no wineries have come courting or the ones that have are offering almost insultingly low prices.

The average ?spot market? price for Sonoma County chardonnay has dropped to between $250 and $500, while cabernet sauvignon is hovering between $500 and $600 a ton, Clements said.

?Some are taking it, some are saying ?no way,? said Clements.

Last year, the average price for Sonoma County grapes was $2,235 a ton, an all-time high.

The dramatic plunge in prices has nothing to do with quality. By all accounts, this year?s ideal growing season is helping produce a crop of stellar quality.

But in many cases the offering price won?t cover the cost of harvest, forcing some growers to leave the fruit on the vine.

?It?s a horrible thing to see,? Clements said. ?We?re working through a bad situation.?

Few growers are willing to admit their crop is about to be lost. Some don?t want the publicity, fearing harm to their reputation. Others are still holding out hope a buyer may show up even as the chances of that happening are fading fast.

?I?ve got 14 tons of cab that we can?t give away,? said a Cazadero-area grower who asked not be identified.

Hoping to avoid that worst-case scenario of unpicked fruit, Meinken chose to roll the dice. On Tuesday, he struck a partnership with Scheid Vineyards in Monterey County to turn his grapes into bulk wine, buying himself some time until the market improves.

Unlike traditional custom crush operations that charge upfront fees, Scheid has waived the fees for a share of the profits.

Meinken will pay for the harvesting of the grapes and transportation to Salinas, and Scheid will crush the fruit, make it into wine, and store it for up to a year. Both Meinken and Scheid will try to find a buyer for the wine.

When it sells, they?ll split the profits on a sliding scale, starting at 50-50. As the price goes higher, Meinken will get a higher percentage of the profits, he said.

For another few thousand dollars, he could have just paid Scheid outright to make the grapes into wine, but he didn?t want to risk that much.

?Everyone I talked with in this industry, people I trust, said this year ?I?d cover your downside,? he said.

Growers like Meinken are driving a spike in demand and custom crush wine facilities around the state.

Winemaker Mike Draxton started a custom crush consulting business last year, and this year has been overrun with requests for help from growers. He?s helping about 25 growers in the region find places to crush their grapes.

?It?s a safety net,? Draxton said. ?This way they stand a chance of not losing their crop.?

Longtime Dry Creek Valley grape grower Mike Rowan took Draxton up on his offer and has turned some of his cabernet sauvignon into wine at a Mendocino County custom crush facility, he said.

?There has just been a great reticence on the part of buyers to commit themselves,? Rowan said.

While he is hopeful that demand for premium wine will bounce back when the economy recovers, high-end wineries aren?t acting as though their fortunes will improve anytime soon, Rowan said.

?There haven?t been any events which would cause you to believe that the recovery has started yet, at least in our business,? he said.

Exacerbating the problem is that imports of bulk wine are up sharply, pressuring the price domestic growers can command for their excess fruit. In the first six months of the year, the amount of bulk wine shipped to the U.S. tripled to 14.3 million cases, said Tony Stephen, director of wine and grape sales for Scheid, citing a report by prominent industry analyst Jon Fredrikson.

?That?s depressing the price of excess California chardonnay to below what they (wineries) were paying for wine from Australia,? Stephen said.

Further depressing prices is the way wineries, instead of buying grapes, are actually selling them, getting rid of excess fruit to avoid high inventory levels.

Sonoma Cutrer, a highly successful chardonnay and pinot noir brand focused on restaurants, scaled back its crush this year by selling off some fruit, said winemaker Terry Adams.

?Our business here is not growing as dramatically as we have been,? Adams said. ?These are tough times, and it?s affecting all of us.?

Tim Meinken has sold every grape he?s ever grown on his Russian River vineyard for the past 20 years.

It didn?t matter if it was chardonnay, pinot noir or syrah, all the grapes he and his wife, Anne Giere, have grown on their 32 acres of rolling hills west of Windsor have enjoyed high demand.

Until this year.

Slammed by the recession and credit crunch, North Coast wineries aren?t buying any more grapes than they absolutely need this year, putting the squeeze on Meinken and fellow high-end grape growers large and small.

?I?ve been trying to sell these grapes for months,? Meinken said, overlooking his vineyard where 25 tons of golden chardonnay still hangs unsold.

With harvest in full swing and his grapes ripening fast, Meinken this week faced a crucial decision ? sell his grapes for a fraction of last year?s value, leave them to rot on the vine, or make them into wine.

His decision is one confronting more and more growers as the harvest continues to barrel forward toward its furious conclusion.

In Sonoma County, a little more than half the estimated 200,000-ton crop has been picked, with only about three weeks left before the rest rolls in, said Nick Frey, president of the Sonoma County Winegrape Commission.

Most of those grapes, perhaps 80 percent, have been pre-sold under contracts to wineries. The remaining 20 percent of the crop typically sells on the open market in the months before harvest.

Those growers who?ve been hoping big wineries would swoop in and buy up the extra grapes have been left waiting at the altar. Either no wineries have come courting or the ones that have are offering almost insultingly low prices.

The average ?spot market? price for Sonoma County chardonnay has dropped to between $250 and $500, while cabernet sauvignon is hovering between $500 and $600 a ton, Clements said.

?Some are taking it, some are saying ?no way,? said Clements.

Last year, the average price for Sonoma County grapes was $2,235 a ton, an all-time high.

The dramatic plunge in prices has nothing to do with quality. By all accounts, this year?s ideal growing season is helping produce a crop of stellar quality.

But in many cases the offering price won?t cover the cost of harvest, forcing some growers to leave the fruit on the vine.

?It?s a horrible thing to see,? Clements said. ?We?re working through a bad situation.?

Few growers are willing to admit their crop is about to be lost. Some don?t want the publicity, fearing harm to their reputation. Others are still holding out hope a buyer may show up even as the chances of that happening are fading fast.

?I?ve got 14 tons of cab that we can?t give away,? said a Cazadero-area grower who asked not be identified.

Hoping to avoid that worst-case scenario of unpicked fruit, Meinken chose to roll the dice. On Tuesday, he struck a partnership with Scheid Vineyards in Monterey County to turn his grapes into bulk wine, buying himself some time until the market improves.

Unlike traditional custom crush operations that charge upfront fees, Scheid has waived the fees for a share of the profits.

Meinken will pay for the harvesting of the grapes and transportation to Salinas, and Scheid will crush the fruit, make it into wine, and store it for up to a year. Both Meinken and Scheid will try to find a buyer for the wine.

When it sells, they?ll split the profits on a sliding scale, starting at 50-50. As the price goes higher, Meinken will get a higher percentage of the profits, he said.

For another few thousand dollars, he could have just paid Scheid outright to make the grapes into wine, but he didn?t want to risk that much.

?Everyone I talked with in this industry, people I trust, said this year ?I?d cover your downside,? he said.

Growers like Meinken are driving a spike in demand and custom crush wine facilities around the state.

Winemaker Mike Draxton started a custom crush consulting business last year, and this year has been overrun with requests for help from growers. He?s helping about 25 growers in the region find places to crush their grapes.

?It?s a safety net,? Draxton said. ?This way they stand a chance of not losing their crop.?

Longtime Dry Creek Valley grape grower Mike Rowan took Draxton up on his offer and has turned some of his cabernet sauvignon into wine at a Mendocino County custom crush facility, he said.

He didn?t have much choice, given the state of the market, he said.

?There has just been a great reticence on the part of buyers to commit themselves,? Rowan said.

While he is hopeful that demand for premium wine will bounce back when the economy recovers, high-end wineries aren?t acting as though their fortunes will improve anytime soon, Rowan said.

?There haven?t been any events which would cause you to believe that the recovery has started yet, at least in our business,? he said.

Exacerbating the problem is that imports of bulk wine are up sharply, pressuring the price domestic growers can command for their excess fruit. In the first six months of the year, the amount of bulk wine shipped to the U.S. tripled to 14.3 million cases, said Tony Stephen, director of wine and grape sales for Scheid, citing a report by prominent industry analyst Jon Fredrikson.

?That?s depressing the price of excess California chardonnay to below what they (wineries) were paying for wine from Australia,? Stephen said.

Further depressing prices is the way wineries, instead of buying grapes, are actually selling them, getting rid of excess fruit to avoid high inventory levels.

Sonoma Cutrer, a highly successful chardonnay and pinot noir brand focused on restaurants, scaled back its crush this year by selling off some fruit, said winemaker Terry Adams.

?Our business here is not growing as dramatically as we have been,? Adams said. ?These are tough times, and it?s affecting all of us.?